More on Buffett Buying Empire

FILED MARCH 5, 2010

Dear Client:

As we first reported yesterday, a subsidiary of Warren Buffett's Berkshire Hathaway has struck a deal to purchase Atlanta-based Empire Distributing, which has operations in Georgia and North Carolina. Empire is owned by brothers David and Michael Kahn. That subsidiary is grocery distributor McLane, worth $34 billion. Bill Anderson's First Beverage Group, including ex-GE Capital executive Sean McLaren, advised Empire on the deal.

McLane provides grocery and foodservice supplies for thousands of c-stores, mass merchants, drug stores, military locations and chain restaurants, with 38 distribution centers nationwide. Berkshire Hathaway purchased McLane from Wal-Mart in 2003 for $1.45 billion.

Ironically, the beer industry believed not too long ago that McLane would make an entrance and bypass franchise beer distributors. Turns out they had their eye on wine and spirits. So what now? We can only speculate the impact this will have on the industry but it seems unlikely Buffett will stop with Empire Distributing. Recall that Berkshire Hathaway also has $11 billion stake in Coke and used to have a large stake in Anheuser-Busch.

We told you yesterday that Buffett likely paid top dollar since Georgia is a franchise state. A law in Georgia caps acquisition based market share at 25% so it would seem that he can't buy too much more market share. However, there are indicators that the 25% law won't always be in place.

This deal could have sweeping implications for the wholesale wine and spirits business. Clearly McLane was smart to obtain their beachhead in a franchise state, where the suppliers are not able to fly. From that established and well-protected base, McLane can move into other regions. This isn't the last we've heard from them. What is unknown at press time is what the wine and spirits suppliers think of such a large public company buying into their distribution system.

What is also unclear is how much McLane, a logistics expert, will integrate Empire's operation into their own. McLane has 38 distribution centers, including one in Georgia and NC. It already services many of the same off-premise accounts and a few on-premise accounts. Will we see wine and spirits on McLane trucks? Time will tell.

As you can see, there are many unanswered questions which we will attempt to answer for you in the coming weeks. Stay tuned...

WINE "ONE OF THE LARGEST" SPENDING CATEGORIES FOR SENIORS

Nielsen analyzed the shopping habits of four key generations - greatest generation (aged 64+), boomers (45-63), gen x (33-44) and millennials (15-32) - and gave a rundown on what marketers should expect when targeting these groups. Interestingly, wine is one of the largest spending categories for seniors at $124 per year. Boomers spend $125 per year on wine, while gen x spends $78 and millennials spend $61 annually.

In looking at other trends, the greatest generation is the most frequent shoppers and more deal prone than other age segments. Both the greatest generation and boomers shop club, dollar and convenience/gas channels more frequently. Millennials don't like to waste much time in stores and shop less than other groups but buy more per trip. Along with gen x, millennials favor mass supercenters and mass merchandisers over more traditional formats like grocery or drug stores which remain a draw for the greatest generation and boomers, says Nielsen.

WSD BRIEFS:

WASHINGTON'S LIQUOR CONTROL BOARD is restricting outdoor alcohol advertising with a new set of rules that basically limits the size, amount and location of ads at liquor-licensed locations. For example, a licensed establishment can only feature 4 signs advertising alcohol, brand names and manufacturers that are visible from the outside. Those signs can only be 1,600 square inches.

ED. NOTE: Starting in about a month, Wine & Spirits Daily will be launching a premium version, with more exclusive content, interviews with industry brass, commentary, and breaking news covering the U.S. wine and spirits industry. WSD has been providing ad-free, independent daily content for four years now, and through that exercise we have been able to build many industry contacts and sources to provide you with information you can't find anywhere else, and bring it to you in a concise, quick-reading format each day. The new premium Wine & Spirits Daily will engage those resources to their fullest. We will let you know more details as we get closer.


Until Monday, Megan

"There are some things you learn best in calm, and some in storm."
Willa Cather

Make yourself heard, your opinions count. Feedback and tipster form: http://www.winespiritsdaily.com/hotline.php

--------- Sell Day Calendar ----------
Today's Sell Day: 5
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Wed.
This month last year ended on a: Tues.
YTD sell days Over/Under: -1

WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com

� 2010 Wine & Spirits Daily, all rights reserved. May quote with attribution.

Follow me on Twitter http://twitter.com/WineSpiritDaily

Go back to listing

Comments

No comments have been posted to this article yet

Top Secret News Hotline:

Got wine and spirits news for WSD?

Submit Anonymously
twitter facebook